The Presence of a Large Amount of Debt Can Encourage

question 92

Multiple Choice

The presence of a large amount of debt can encourage shareholders to take excessive risk because

• A)equity holders are risk seeking by nature.
• B)firm value increases with risk taking.
• C)the costs of failure are borne largely by debt holders.
• D)debt holders are risk seeking.

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Definitions:

Christian Ideal

The principles and teachings of Christianity that followers strive to embody, including love, compassion, and forgiveness.

Looking Backward

A utopian science fiction novel by Edward Bellamy that imagines a future society based on social harmony and economic equality.

Social Darwinist

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